How Finance Fits Into Your Overall Business Process

When setting up a new business or overhauling an existing one, a well-considered and thoroughly researched business strategy should always come first.

Once you have a solid business strategy, you can then plan out the various business processes required to meet your strategic goals. A core part of a successful business strategy is finance, and a focus on the finance business procedures will ensure efficiency and help you to meet your targets.

This article goes into more detail on the role of finance within your strategy and overall business process. It suggests the steps to take to identify areas where you can enhance your finance business process and highlights one immediate improvement you can make today to streamline your finance operations.

Business Strategy

To understand how the finance function fits within your business, it’s vital to first understand it’s role within your business strategy. But just what is a business strategy?

A business strategy is a long-term view on where you envision your business to be in the near future. It includes:

• vision statement including values
• mission statement
• market research to identify differentiation to competitors and your opportunity
• target audience
• the products or services you plan to sell
• internal analysis on competitive advantage
• realistic goals and objectives

A successful strategy will:

• be aligned to the market and external factors
• have a clear understanding of internal strengths and competencies
• determine the most efficient implementation processes
• put in place systems to closely monitor performance against goals and objectives

In addition to other business-specific measures, tangible financial goals and metrics mapped to the wider strategy help business owners track success.

Business Process Management

The business strategy lays out where you want your business to be. The business process maps out how you plan to get there. It’s a translation of the strategy into business operations to meet specific end points.

Each process is a sequence of events or tasks that must be performed in a specific order to achieve the desired outcome. The workflows you might need to consider for your business to run effectively include:

1. Operational processes:

• sourcing raw materials
• manufacturing of the products
• how you take customer orders
• how you deliver customer orders
• customer service and account management
• dealing with suppliers
• quality assurance and compliance

2. Management processes:

• corporate governance
• employee oversight
• budgeting
• business strategic planning and growth

3. Supporting function processes:

• finance and accounting
• HR and recruitment
• IT or tech support
• office management
• marketing

Financial Strategy

Now you’ve set out your strategy and the processes that will help you achieve your goals, finance – whether that is you, your finance team or a finance individual – will indicate how much it will cost to get there.

The financial strategy plays an integral role in decision making and strategic planning. A robust financial strategy is key to a thriving business.

The financial strategy includes budgeting, forecasting as well as financial goal setting. Financial objectives should align with the over-arching business strategy. These targets can be business-wide, by functional area or business unit. The strategy could also include goals for diversifying income streams or customer acquisition.

Financial Measures

If you’re serious about tracking your business’ performance, then you need to regularly analyse the hard numbers. This financial data will show immediately if you’re doing what you need to in order to achieve your goals – or if you’re falling short.

Financial metrics are a standard measure of a company’s performance. These can include:

• free cash flow
• net cash available
• working capital
• profitability ratios
• growth indices

Regularly tracking granular data to measure against financial goals helps to:

• project future earnings and performance
• enable big picture business planning and growth
• clarify the key drivers of your business strategy
• increase profitability by quickly identifying what is working and what isn’t
• increase the efficiency of business operations and processes

Role of Finance in a Business

Finance is an essential part of every business. Finance teams or employees manage the following:

• assessment of current financial situation
• setting of future targets
• allocating appropriate resources to different areas and action plans to meet the business objectives – such as hiring people, infrastructure, equipment, marketing etc.
• assessing risk – for example, if a department or team wants to invest heavily in a new project, the finance team can assess the risk and put forward a more suitable budget to maintain the financial health of the company
• budgeting for capital – evaluating funding requirements such as loans or borrowing capacity
• managing cash flow – knowing how much is sitting in the bank and whether it’s enough to pay suppliers and staff each month
• profitability and cost control – analysing opportunities to reduce costs
• tax optimisation – assessing tax implications of new initiatives and weighing up if they will add value after new tax contributions

Finance Process

Each operation of the business, including the finance department, will have repetitive, sequential procedures. These must be efficient, accurate and compliant with any regulations and include safeguards against fraud.

Finance processes could include:

• handling and paying staff expenses e.g. travel, food, accommodation
• payroll and benefits
• accounts payable e.g. raising purchase orders for the procurement team
• accounts receivable e.g. invoicing
• credit control and payment collection
• cash flow management and forecasting
• tax processing
• financial transaction ledger management and tracking
• reporting and analysis
• budgeting and planning
• adding sales and order data to financial budget spreadsheets

Finance Process Management and Improvement

Finance process management is critical to get right. Unmanaged and chaotic procedures can rapidly damage the finance department and wider business.

Inefficient, unpredictable and messy procedures are:

• time-consuming
• demoralising for employees with increased blame and no accountability
• a breeding ground for errors
• unable to track data or insights
• more likely to miss deadlines, delaying internal or external reporting
• lacking in visibility in terms of what stage a task or project is up to
• sluggish to react to dynamic business needs

A smooth-running finance function is essential for business success. Do you recognise any of the points above as the day-to-day reality of your finance operation? Then you should consider making adjustments to improve your finance process management.

First, take a step back. Conduct a thorough audit as to how your finance processes are running. Identify the following within your processes:

• the use of complicated, error-prone spreadsheets
• extensive manual processes, such as manual data re-entry
• bottlenecks that halt a process at a specific stage due to difficulty, human/technology error or limited access to relevant colleagues
• duplicated or redundant tasks
• no task status visibility or reporting function
• software and system integration issues causing errors or missing data

Now you have an awareness of which processes are failing. Next, assess the methods to develop these areas. Enhancements could include:

• automation of repetitive tasks
• investment in software, such as accountancy platforms
• streamlining communication between people/functions/departments
• setting an authorisation process with a hierarchy of approvals
• ensuring accountability with clear job roles and responsibilities for specific tasks
• standardising procedures with a well-defined workflow of tasks
• agreeing recurring deadlines for reporting

Even if you’re saving one minute to five minutes per day, this soon adds up to significant time savings.

How to Implement Business Process Improvement (BPI)

Significant changes within a business involve administration, preparation, staff communication and training. It’s important to treat finance BPI as a project with the relevant planning and management. This will ensure a pain-free transformation.

Here are the steps you should follow when improving processes:

1.  Get senior support – if you’re not the business owner or director, then you’ll need to get support for any changes from the leadership team. Present the rationale as to why this change will dramatically improve upon the current procedure.
2.  Design the new process – work with the relevant team members involved in the existing process to develop the new workflow. This could include brainstorming different solutions or researching software tools.
3.  Apply risk assessment to each solution – consider each idea within a realistic context to select the most appropriate.
4.  Map out the resources required for implementation
5.  Create a project management plan and timeline
6.  Assemble a team to implement
7.  Make the change and solve any teething problems
8.  Continually review the new process to ensure it’s working as planned

If you run your own business and are in charge of the financial aspects, then you can still follow the above steps to ensure a straightforward change in procedures.

One Immediate Improvement That Will Streamline Your Finance Process

Are you still collecting regular customer payments manually? Either by taking credit card details over the phone, waiting for cheques to arrive in the post or chasing clients to remind them to make a bank transfer?

If the answer is yes, then there is a simple and straightforward method to immediately streamline this process, saving you time and money.

Collecting regular payments by Direct Debit is a popular, time-tested method. It will improve your cash flow and reduce time spent in credit control. It will also boost staff morale by automating a repetitive task freeing up their time to work on other priorities. Find out more here.

And That’s How Finance Fits

Finance is a crucial element of your business strategy and process. Those managing the finance of a business – whether that is you, the manager of a finance team or one staff member – must have the ability to understand the wider financial strategy as well as the individual processes that make up day-to-day operations.

Streamlining workflows, investing in software and mitigating pain points will enable your finance function to run efficiently.

And that in turn enables you to plan for the future with accurate financial data and a highly productive finance operation.